How nonprofits can meet compliance requirements in 2024


Tom Dredge, Nonprofit Lead • December 19 2023

Nonprofits operate under unique regulations, making it crucial to implement policies to adhere to these rules. By failing to comply, organisations risk losing important funding and harming their reputation. In this article, we’ll talk about the consequences of non-compliance, how regulations are evolving in 2024, and what organisations can do to keep up.

Why compliance matters

Nonprofits depend on the trust and backing of donors, beneficiaries, and the public. In return, they expect nonprofits to adhere to regulations and demonstrate responsibility and transparency to maintain that trust. Compliance for nonprofits is more than just a tick-box exercise — it’s about protecting the mission, trust, and credibility of the organisation. This starts with truly knowing who they associate with or accept funds from. But what are the consequences when an organisation fails to comply?

Financial penalties

Organisations face hefty fines if they don’t adhere to the regulations governing their sector. These penalties can put a strain on finances, diverting resources away from your mission.

Funding loss

Many organisations depend on grants and donations to fund their activities. Non-compliance can result in the loss of crucial funding support, hindering your organisation’s ability to make a positive impact.

Reputational damage

Trust is everything for a nonprofit. Non-compliance can tarnish your reputation, eroding the public’s confidence in your mission and affecting your ability to attract supporters.

What’s driving regulatory expectations in 2024?

Compliance for nonprofits in 2024 is expected to become more time-consuming and challenging for several reasons. 

Increased scrutiny

Nonprofits around the world are under increased scrutiny from government agencies, donors, and the public. There’s a growing emphasis on transparency, accountability, and ethics. Universities in the UK, in particular, are expected to do their due diligence on every third party they partner with for research and innovation projects.

Donor expectations

Donors are increasingly concerned about how nonprofits manage their funds and operations. This is leading to a demand for transparency and accountability, requiring nonprofits to invest more time and effort in demonstrating their commitment to ethical practices.

Funding challenges

Nonprofits often rely on grants and donations to operate. Granting organisations and donors are placing increasingly stringent compliance requirements on the use of funds, necessitating careful tracking and reporting.

Environmental and social responsibilities

As environmental and social responsibility become more prominent concerns, nonprofits need to comply with additional regulations related to sustainability practices, diversity and inclusion, and ethical supply chain management.

Your nonprofit compliance checklist for 2024

Implement donor due diligence policies

The Charity Commission encourages all nonprofits to apply Know Your Donor (KYD) principles to donors. Not doing so is risky for nonprofits that depend on donations and their reputation. Although universities are not obligated to follow the Charity Commission’s regulations, it’s seen as good practice for fundraisers to adhere to Charity Law and the Commission’s guidance. At the very least, universities should aim to uphold the fundraising principles for trustees outlined by the Charity Commission.

Document internal compliance policies

Nonprofits should develop clear, comprehensive internal compliance policies tailored to your organisation’s specific needs. Having a comprehensive written policy for financial management gives clear guidelines for how funds are to be managed and documented. This ensures that everyone in the organisation understands the processes for handling donations, expenses, and financial reporting to prevent financial irregularities.

Provide compliance training

Invest in training programs that educate your staff, board members, and volunteers about compliance requirements During these sessions, participants learn about the latest changes in tax laws and reporting requirements. As a result, your team is well informed and equipped to make informed decisions, reducing the risk of inadvertent compliance violations.

Monitor and audit compliance measures

Compliance isn’t a one-time task… it’s an ongoing process. Regularly monitor and audit your compliance measures to identify any gaps or areas that need improvement. This proactive approach prevents potential compliance issues from escalating, and corrective actions are taken to rectify the discrepancies.

2024 is the year of AI for nonprofits

Technology is always advancing, and online information about potential donors and third parties is continually growing. Nonprofits that overlook the advantages of AI risk falling behind. For research teams, manually searching, analysing, and summarising this vast information and then sharing across the organisation is impractical, if not impossible.

Tools like Xapien provide a comprehensive view of donors, covering risks from sanctions to allegations, corporate structures, key associates, and online reputation. 

Read more on what Xapien can do for your research team here. Or check out the six use cases for AI in nonprofit research and due diligence here. Alternatively, book a chat with our expert team below.

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